Item 3. Japan-U.S. Framework Talks and New Global Business Plan

In the United States, the administration of U.S. President Bill Clinton began in 1993. In July of that year, a "joint statement concerning a framework for a new economic partnership between Japan and the United States" was announced at a summit held in Tokyo with Prime Minister Kiichi Miyazawa, and the Japan-U.S. Framework Talks began on the basis of that statement. Autos and auto parts remained a major topic of the talks, which continued for approximately two years until a final agreement was reached in June 1995.

From the beginning of the talks, the U.S. government adopted a strict stance, requesting that the Japanese side set numerical targets concerning imports and procurement of autos and auto parts. As a result, it was difficult for the Japanese government to find points of agreement, and the talks frequently came to an impasse. It was against this backdrop that TMC announced a "medium-term international business initiative" in March 1994. TMC sought to cooperate not just with the United States, but the entire world based on the creation of a global completely-built-unit production and supply system and parts and material procurement system.

The core of the initiative was an expansion of local production, mainly by TMM (now TMMK) and TMUK, with a target of increasing overseas production from 890,000 vehicles in 1993 by about 50 percent by 1996. The initiative also addressed promoting exports from overseas bases, and sought to achieve exports of 80,000 vehicles produced in the United States to Asia, including Japan, and Europe in 1996.

In October 1994, the Japan Automobile Manufacturers Association, Inc. (JAMA) announced the JAMA Action Plan for International Coordination to indicate the willingness of Japanese manufacturers to make greater efforts. The U.S. government recognized that the authority of the Japanese government did not extend to the plan announced by JAMA, a private body, but insisted that the figures in the plan be increased, and began an investigation concerning the Japanese refurbished parts market pursuant to Article 301 of the U.S. Trade Act in that same month. As a result, the talks temporarily broke down.

In May 1995, U.S. Trade Representative Mickey Kantor announced talks concerning the closed nature of the Japanese auto and auto parts markets at the World Trade Organization (WTO). At the same time, a "candidate list concerning unilateral measures" imposing 100 percent ad valorem duties on 13 imported Japanese luxury cars based on Article 301 was announced. In response, the Japanese government initiated dispute resolution procedures at the WTO on the grounds that announcement of the list was in violation of WTO rules.

It was expected that the negotiations would become protracted, but Minister of International Trade and Industry Ryutaro Hashimoto and U.S. Trade Representative Kantor held a ministerial conference in late June 1995, and the negotiations were suddenly concluded. The two sides agreed that the Japanese government would maintain its principle of not participating in numerical targets set by the automobile industry and the U.S. government would evaluate the voluntary plans of Japanese automakers. As a result of this agreement, Japanese automakers released voluntary plans one after another.

Before dawn on June 29, the day after the agreement was announced, TMC released its New Global Business Plan based on promoting local production and expanding imports. With respect to localization, the plan provided for the acceleration of overseas production and raising the percentage of vehicles produced overseas from 48 percent in 1994 to approximately 65 percent in 1998. To increase imports, the plan also included import of the Toyota Cavalier produced by GM starting in 1996, the start of import of the Avalon produced by TMM, and an increase in procurement of assembly and spare parts. Furthermore, in order to disclose the status of progress of the plan until its end in 1998, TMC released four progress reports until the final report was issued in March 1999 and publicized the steady implementation of the plan.